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Economic Growth Ends Year With a Slower Q4, Poised to Strengthen in 2015

WASHINGTON  After a roller-coaster year for the U.S. economy, in which economic growth pitched and rolled from quarter to quarter, 2014 is expected to end on an unspectacular note, as some unsustainable forces that drove activity in the third quarter reverse in the final quarter. Fannie Mae’s (OTC Bulletin Board: FNMA) Economic & Strategic Research (ESR) Group forecasts full-year growth of 2.1 percent for this year, a full percentage point below the 2013 pace. However, growth still is expected to strengthen heading into the new year, driven by firming consumer income prospects, rising consumer and business confidence, a broadening housing recovery, and reduced fiscal headwinds. Overall, the Group expects economic growth of 2.7 percent for all of 2015.

“The December forecast is relatively little changed from the November forecast. We expect a weaker fourth quarter to follow a stronger third quarter, but we don’t see it as a sign of overall weakness,” said Fannie Mae Chief Economist Doug Duncan. “Although real consumer spending growth has disappointed this year, it appears poised to accelerate in November due to a significant jump in auto sales and a likely pick-up in home heating costs. The decrease in oil prices certainly may support consumer spending over time, particularly now during the holiday shopping season, as well as hold down inflation as a potential benefit to consumption. Based on the stronger consumer story that we expect to see in 2015 relative to 2014, we upgraded our forecast from approximately 2.5 percent growth to 2.7 percent growth for the full year.”

“Similarly, the housing market is likely to continue its gradual climb upward next year after a sub-par 2014,” said Duncan. “We anticipate a fairly strong increase in housing starts in response to stronger employment and some improvement in related household incomes. As a result, that may help to unfold some of the suppressed household formation numbers and incent builders to meet some of that increased demand. For all of 2015, we expect total housing starts to increase by about 22 percent and total home sales to rise approximately 5 percent, with total mortgage originations ticking up slightly to $1.13 trillion.”

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full December 2014 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.

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